ELECTCASTNSE17 May 2022

Electrosteel Castings Limited

7,712words
162turns
14analyst exchanges
1executives
Management on call
Sonpal. Anuj Sonpal
Thank you. Good morning everyone and a very warm welcome to you all. My name is Anuj
Key numbers — 40 extracted
rs,
ng remarks. We have with us Mr. Sivalai Senthilnathan – Vice President Finance and Corporate Affairs, Mr. V M Sridharan – Senior General Manager of Finance, Mr. Neelesh Daga – General Manager of Accou
35%
lone basis of our company for Q4 financial year 22. The total income for the quarter increased by 35% year-on-year to Rs. 1,584 crores, EBITDA increased by 37% year-on-year to Rs. 233 crores represen
Rs. 1,584 crore
mpany for Q4 financial year 22. The total income for the quarter increased by 35% year-on-year to Rs. 1,584 crores, EBITDA increased by 37% year-on-year to Rs. 233 crores representing EBITDA margins of 14.68%. N
37%
tal income for the quarter increased by 35% year-on-year to Rs. 1,584 crores, EBITDA increased by 37% year-on-year to Rs. 233 crores representing EBITDA margins of 14.68%. Net profit grew by about 10
Rs. 233 crore
rter increased by 35% year-on-year to Rs. 1,584 crores, EBITDA increased by 37% year-on-year to Rs. 233 crores representing EBITDA margins of 14.68%. Net profit grew by about 103% year- on-year to Rs. 723 cro
14.68%
584 crores, EBITDA increased by 37% year-on-year to Rs. 233 crores representing EBITDA margins of 14.68%. Net profit grew by about 103% year- on-year to Rs. 723 crores and the PAT margin percentage were
103%
7% year-on-year to Rs. 233 crores representing EBITDA margins of 14.68%. Net profit grew by about 103% year- on-year to Rs. 723 crores and the PAT margin percentage were 7.74%. For the financial year
Rs. 723 crore
. 233 crores representing EBITDA margins of 14.68%. Net profit grew by about 103% year- on-year to Rs. 723 crores and the PAT margin percentage were 7.74%. For the financial year ending 2022 the total income gr
7.74%
. Net profit grew by about 103% year- on-year to Rs. 723 crores and the PAT margin percentage were 7.74%. For the financial year ending 2022 the total income grew by 63% year-on-year to Rs. 5,095 cror
63%
the PAT margin percentage were 7.74%. For the financial year ending 2022 the total income grew by 63% year-on-year to Rs. 5,095 crores, EBITDA grew by 60% due to this 717 crores representing EBITDA m
Rs. 5,095 crore
ntage were 7.74%. For the financial year ending 2022 the total income grew by 63% year-on-year to Rs. 5,095 crores, EBITDA grew by 60% due to this 717 crores representing EBITDA margin of 14.06%. Net profit grew
60%
al year ending 2022 the total income grew by 63% year-on-year to Rs. 5,095 crores, EBITDA grew by 60% due to this 717 crores representing EBITDA margin of 14.06%. Net profit grew by 148% to Rs. 323 c
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Guidance — 20 items
Management
opening
“We increased the capacity of Ductile Iron Pipes plan to 4 lakh tons per annum during the year at our unit in South India.”
Saket Kapoor
qa
“Sir that will be at a lower cost the cost of funding would be lower because of lower working capital if you could breakup of the cost of funds?”
Saket Kapoor
qa
“Booking keeping questions I will take from you later on that would be better in the paucity of time, but sir on maintaining of this margin part if you could throw some more light what steps are there and are these EBITDA margins sustainable and for the next year are we looking for this 95% utilization that was to continue and also that 1 lakh ton more additional capacity when are we trying to augment and what kind of CAPEX is there for FY23.”
Management
qa
“We have been able to maintain our margins in spite of the rising raw material cost, but the guidance cannot be given on the future quarters.”
Management
qa
“Yes so that is definitely on the cards and we are working towards it, but because most of the equipments will be coming from China and China is into kind of lockdown situation so we are not able to move in the pace that we had thought so, so it is taking little time.”
Management
qa
“The capacity build up will take around you can say 21 months to 24 months time and once the China reopens we will be able to start.”
Management
qa
“When we have stepped in this financial year we will be operating our plants at full capacity the 1 lakh ton expansion that had happened in our Southern unit will be available for the entire full year so that will come into play.”
Management
qa
“So, we hope that we will be able to do around 7 lakh tons in FY23 or maybe plus minus 5%.”
Deepak Poddar
qa
“And then what would drive the growth in coming years maybe in FY24-25 because we will be almost 100% utilization level right?”
Management
qa
“So, we are aiming for something around 1.5 lakh tons.”
Risks & concerns — 9 flagged
Saket ji that phenomena will always remain, but as a cautious decision the management is trying to keep order book at a lower level.
— Management
So, the expansions and the capacity coming up we do not see any concern in fact it is good for the market and I think and this is also not a fragmented industry there are very limited and renowned players.
— Management
So, we do not see any concern on the EBITDA because this is the kind of minimum EBITDA which every player needs to maintain.
— Management
Just one more clarification as you mentioned that predominantly the client remains government tenders and orders, so do we see any challenge in terms of how what will be the pace of these orders coming through because I think in past we have seen some challenge in that regard in terms of allocation of the budget?
— Malluchuru
So, it is very difficult to give you exact number what will happen in Q1 because we have some inventory of earlier bookings and some now fresh stock is also coming in so average cost will definitely go up, but yes the prices are up from what it used to be.
— Management
Though it is a bit of challenge to pass on the entire increase cost to the end customer, but definitely the maximum increase in cost is getting passed on.
— Management
Kaushik so in terms of cost I will not be able to give you where we stand globally it is difficult for us.
— Management
Whenever the compensation comes in it will be a huge gain for us, but since the request is now with the government that is with the ministry of coal to clear the file, to give a timeline is also a big challenge for us.
— Management
As far as mines goes it is very difficult to comment because as you know this our compensation is in litigation or you can say we have been requesting the government to clear our compensation for last 7 years and as of now we have no clarity.
— Management
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Q&A — 14 exchanges
Q
Sir firstly for this current capacity which has been enhanced to 4 lakh tons of Kalahasthi, have we got the benefit of entire 1 lakh ton factored in for this year or if you could explain?
Management
Yes we have gone to 4 lakh ton capacity in August 2021. So, since then gradually we have received the 100% capacity so we are running at 100% capacity now. Firstly sir taking into account the macro environment especially in terms of the fluctuations which we are seeing in the raw material prices, how confident is the company of maintaining this margins and what steps are we taking of further improving the same and also point about the pig iron sales last quarter it was mentioned that we did sold a good quantity of pig iron and currently I think with Russia and Ukraine crisis still continuing,
Q
Just wanted to get a sense of how much revenues we booked on pig iron sales for the entire FY22?
Management
We did around 330 crores of pig iron sales. And any sense of how you want to so the good part is that most of the debt is because of working capital, so as and when things normalize I guess the requirement of the business will come off, but can we say that broadly speaking the debt has round about peaked around this level because the business is also throwing up reasonably good amount of cash? The revenue is a factor of the raw material in the input cost if input prices remain here. So, we can say the debtors will peak out here because now we are at almost peak prices of coking coal, iron ore
Q
Sir firstly I wanted to understand on the volume front now I think 6 lakh odd DI pipe volume we did in last year FY22, so how do we see volume growth over FY23 and maybe next two to three years some outlook on that would be helpful?
Management
So, you are right this year we did around 6 lakh tons of DI pipes. When we have stepped in this financial year we will be operating our plants at full capacity the 1 lakh ton expansion that had happened in our Southern unit will be available for the entire full year so that will come into play. There we have a capacity of 4 lakh tons and in the Eastern unit we have a capacity of around 3 lakh tons. So, we hope that we will be able to do around 7 lakh tons in FY23 or maybe plus minus 5%. And then what would drive the growth in coming years maybe in FY24-25 because we will be almost 100% utiliza
Q
Sir do we procure any pig iron from outside for our West Bengal plant and as well as our Chennai Plant the cast iron plant and what are the volumes?
Management
The plants that we have are backward integrated so we have our own blast furnace in both the units. So, we do not need to buy pig iron from outside sources. So, there is no external purchase wholesaler of pig iron? No. And sir what was our export volume for FY21 and FY22? FY21-22 DI pipes exports was around 22% to 23% of the total DI pipe volumes. For both the years 22% to 23%? Yes. And going forward can you throw some color on the export opportunity going forward as a given fact that US is planning to replace their lead pipes also Electrosteel as a firm we have a big global presence I mean we
Q
I have three questions one is in continuation with the previous queries that in terms of the new capacities which are coming up, do we see any challenge in terms of margins been squeeze because of the competition and secondly how many out of the total orders how much is the government related orders and do we see any issue in terms of allocation from the budget I mean there is a budget announced it is a huge budget towards 'Nal Se Jal', but how much is already allocated and how slow it would be your how can we expect it going forward and lastly the captive power currently account for how much
Management
So, most of the orders or per se the entire order has come from government bodies only. Ultimately the buyers of the DI pipes are government bodies so they come out with tenders and either they procure the pipes directly or they do it through the EPC contractors. So, for us the end customers are government bodies only. In terms of margins when the competition comes in see the competition is already there it is just that the capacity is going up slightly maybe by around 10%, 15%. Right now we have a industry capacity of around 2.5 million tons which is expected to go to around 3 million tons an
Q
I have three set of questions one as per what previous participant was asking on the export markets, could you throw some light on the demand that you are seeing I mean you explained a lot of the supply side how it is all placed, but what kind of demand would you be seeing from couple of these geographies like US and Europe etcetera?
Management
See we are present in the export since last two decades as I mentioned earlier and we have been a very consistent player. We have till now not been able to ramp up our export volumes much because we have limitations we also want to be servicing the domestic market. Till now we were exporting around 40% to 50% of our volumes to the entire global market and markets like US, Europe they have huge opportunities and with the merger of Kalahasthi we have now more opportunities available in terms of supplies because Kalahasthi is at a capacity of 4 lakh tons and that will give us room to push out mor
Q
I would like to know what is the cost leadership of Electrosteel globally if you do the cost curves in which quadrant would Electrosteel operations fall both the production sides and also what is your global market share and how competitive are you vis-a-vis large Chinese companies?
Management
Very tough query Mr. Kaushik so in terms of cost I will not be able to give you where we stand globally it is difficult for us. There are many players . So, we have not done that kind of comparisons we neither have those data also with us. So, I am sorry I will not be able to answer your queries. What about your global market share? We have not done such studies. From India see I think only two players are into exports one is Electrosteel and other I think is Jindal Saw and the overseas market is big enough so I am not sure what is our share, but we are fairly placed. And one more question wha
Q
Sir you are talking about opportunity emerging from irrigation sector so are these like large diameter pipes and what is the margin profile diameter as in we make more margins?
Management
These are higher diameter pipes, but then margins will be same whatever margin we get maybe it is a bit more, but domestic market the margins will be almost similar. The usage of the product will work so the demand will go up. Diameter profile would not change anything that s what you are saying? No it will be a bigger diameter. No but that would not impact our margins is that understanding correct? Yes. And sir just going back to exports I mean we are exporting almost $100 million worth of DI pipes since last 5 years, 7 years on a consistent basis, so what percentage of our exports are going
Q
My question is related to vision about the management, can you share some insights on the vision for this company for the next 5 years or 10 years where will we see this company in the next 5 years or what is the vision of the management?
Management
See Electrosteel Castings Limited has been a dominant player in Ductile iron and pipe industry since maybe last three decades. We are very focused on the DI pipe segment, This is our main product which is bread and butter and we have been trying to integrate our operations to the best extent possible. Over the last many years we have done backward integration in terms of enhancing our power plant capacity, setting up Ferrosilicon, Silico Manganese plant, setting up our own paint plant, increasing the capacities by debottlenecking, forward integration also we have done. So, we are leaders and t
Q
My question is sir like as you said earlier that the raw material cost is increasing will it affect the profit margins in near future?
Management
yes the raw material prices are rising and has been rising since last four quarters and till now we have been able to successfully pass it on to the end consumers and we have also tried our best to reduce our cost levels. Going forward see we cannot give any concrete reply how it will work out, but yes we are trying to maintain the margins. Secondly sir can you just tell me like what is your trade receivable? We have around 1,000 crores of trade receivable as on 31st March.
Q
As mentioned by Gaurav ji that the EBITDA margins are higher in case of exports, but sir can you please explain then why our consolidated numbers PBT are lower by around 10 crores I am talking about the standalone PBT at 153 crores and the consolidated at 143 crores?
Management
Saket ji will have to take some time out and go through the numbers and come back to your query please allow us to come back to you. Sir in the DI fitting part we have this 15,000, 16,000 capacity for a long time are we augmenting any capacity addition here also sir and how are the margins I think margin for the fitting segment is higher so are we contemplating anything in this direction? Saket ji I will correct you here in fittings our capacity used to be around 5,000 tons to 6,000 tons around three to four years back. We have again done CAPEX here and we have increased the capacity to around
Q
Could you just tell us what is the plans for our Chennai plant what is the current status and how you propose to use the SCI plant in Chennai and also one more thing is that whether it is legally possible for you also to be a participant in case Parbatpur comes up for bidding and whether you have any interest in that because I understand that you have been to tremendous expertise in this mining and it does seem to be a good standalone business?
Management
CI pipe is the old technology and DI pipe is a newer technology. We are producing a very nominal quantity of cast iron pipes to cater to the demand which is available in that region nothing more than that. It is not contributing significantly to our overall EBITDA. So, we are producing around say 30,000 tons and it is a self sustainable plant. There is no kind of very broader vision on that particular plant. As far as mines goes it is very difficult to comment because as you know this our compensation is in litigation or you can say we have been requesting the government to clear our compensat
Q
I just want the book keeping number what is our gross debt and net debt at present?
Management
Gross debt as on 31st March was around 2,700 crores and net debt would be around 1,900 crores. Do you say 27 and 19? Yes 2,700 and 1,900. Of this 27 how much is working capital? Working capital is around 1,700 crores.
Q
Thank all for the active participation in this conference call. I thank Valorem team and team for supporting to have this conference call successfully. I wish you all to keep safe. Thank you all.
Management
Speaking time
Management
75
Chetan Phalke
21
Moderator
16
Saket Kapoor
13
Kaushik
9
Sahil Sanghvi
7
Deepak Poddar
5
Sanjay Dam
3
Malluchuru
3
Ravi
3
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Opening remarks
Anuj Sonpal
Thank you. Good morning everyone and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the investor relations of Electrosteel Castings Limited. On behalf of the company, I would like to thank you all for participating in the company’s earnings conference call for the fourth quarter and financial year ended 2022. Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings concall maybe forward looking in nature. Such forward looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management belief as well as assumptions made by an information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings conference call is purely to educate and bring awareness about the c
Management
Thank you Anuj. Good morning everybody. It is pleasure to welcome you to the earnings conference call for the fourth quarter and financial year ended 2022. Firstly, I hope that everyone is keeping safe and well. Let me first take you through the financial performance on a standalone basis of our company for Q4 financial year 22. The total income for the quarter increased by 35% year-on-year to Rs. 1,584 crores, EBITDA increased by 37% year-on-year to Rs. 233 crores representing EBITDA margins of 14.68%. Net profit grew by about 103% year- on-year to Rs. 723 crores and the PAT margin percentage were 7.74%. For the financial year ending 2022 the total income grew by 63% year-on-year to Rs. 5,095 crores, EBITDA grew by 60% due to this 717 crores representing EBITDA margin of 14.06%. Net profit grew by 148% to Rs. 323 crores by PAT margin improved to 6.39%. On the operational front, the production for the Ductile Iron Pipes for the fourth quarter of financial year 2022 was 1,77,889 tons ag
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